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RBA rate hike 'plausible' this year with more persistent inflation

burning US dollar

The S&P/ASX 200 closed up 1% at 7053, having touched an intraday high of 7072. The Australian dollar weakened overnight, sinking below US73c, and is trading around US72.80c, strengthening through the day.

Consumer confidence dropped 4.2% to 96.6 points in March. Westpac data showed the weakest result since September 2020, which was also the last time the index fell below 100, the level indicating that pessimists outnumber optimists.

Russia’s invasion of Ukraine, flooding, rising prices and the prospect of higher interest rates have unsettled households. The clean up after major flooding on the southeast coast of Australia has generated more than 100,000 claims already, with insurers expected to foot the bill for more than $1.5 billion in damages.

Australia’s Reserve Bank governor Philip Lowe said on Wednesday that the Ukraine energy price shock could lead to higher inflation being more persistent and broad-based and a rate hike this year was “plausible”. Australia’s central bank chief said he expected headline inflation to spike above 4% this year.

US inflation is being tipped to hit 8% in data being released on Thursday, an acceleration from the prior month. Rising commodities prices and export disruptions to energy and agriculture are fanning flames that inflation will continue to increase and reduce the pace of economic growth.

Bloomberg reports that Russia is also a major low-cost exporter of fertilisers and without a consistent supply, farmers will have a harder time growing everything, pushing food prices even higher.

Analysts expect gold prices to find support at US$2000 an ounce and below there around US$1973.

WTI crude oil "appears overextended on a weekly chart", according to Trade With Precision analysts.

The Aussie dollar is at US72.80c against the US dollar.

Bitcoin is US$41,470.

Gold is US$2056.42 an ounce.

Brent crude oil is around US$132.93 a barrel.

WTI crude oil is at US$127.10 a barrel.

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